Indian Telecom Sector Thesis


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Indian Telecom Sector Thesis

  1. 1. THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT, AHMEDABAD THESIS TOPIC “Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry” SUBMITTED BY Naman Shah PGP/SS/06-08 ALUMNI REFERENCE ID: SS/06-08/AHD/MKTG/2 SUMISSION DATE: 27th August, 2008 GUIDED BY Prof. Pabitra Ranjan Chakravorty Senior Research Associate (Marketing) IIPM, Ahmedabad.
  2. 2. I LETTER OF CONSENT IIPM Ahmedabad 19, Inquilab Society, Gulbai Tekra, Ahmedabad-380015 To, The Dean, IIPM-Ahmedabad Date: November 6, 2007 Respected Sir, Subject: Letter of Consent I, Prof. Pabitra Ranjan Chakravorty, a faculty of Marketing Management of IIPM-Ahmedabad, expressing my interest in guiding for a thesis on “To critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry” to Mr. Naman Shah, a student of PGP/SS/06-08. This is to inform that I shall support him as a guide for his thesis on the above mentioned topic and extend my knowledge and help in all ways possible. Thank You. Yours faithfully, Prof. Pabitra Ranjan Chakravorty.
  4. 4. III PREFACE The customers are very important and play a crucial role in any process of marketing. Today, customers are the kings of the market because the customer loyalty and customer preference are built by the products and the services offered to the customers and they seek for the more benefits and money’s worth for the amount they spend. That is where the concept of customer preference and consumer behavior comes because the customers make the marketers to rethink about designing the products and services. They have to think about the market segmentation, market strategies, consumer behavior, consumer’s tastes, consumer’s lifestyle etc also. Many marketers are smart enough to understand consumers’ needs, wants and demands and perform beyond their expectations i.e. they delight them. It provides them growth, profitability and creativity with lot of inventions.
  5. 5. IV ACKNOWLEDGEMENT A mammoth thesis of this nature calls for intellectual nourishment, professional help, and encouragement from many quarters. I would like to express my gratitude to: The pioneers in the field of marketing management who have shaped their understanding through their rich and varied contributions. Professors and seniors for providing the stimulus for making this thesis successful. A number of academics and practitioners for generously sharing their insight and experience with me. It is my immense pleasure to work under the guidance of Prof. Pabitra Ranjan Chakravorty, and we heartily thank them for providing me the guidance whenever needed. I am also thankful to beloved The Dean and Professor Dipankar Sarkar, who gave me guidance in each and every matter all the time. My heuristic approach towards the project was one of the major contributors in the outcomes that we arrived at. I’d like to thank my institution, IIPM – Ahmedabad, for providing me this great opportunity and attempting to inculcate the traits needed to succeed.
  6. 6. V I am also thankful to various industry experts and executives for sharing relevant information and valuable thoughts with me and helped me in writing my thesis.
  7. 7. VI SYNOPSIS Aim: The aim of this study is to analyze critically the customer preference and their satisfaction in Telecom Sector. Objectives of the study: • To understand the improvement and customer preferences in Telecom Sector. • To study the service providers and their service quality in the Telecom Sector. • To study the customer satisfaction and understand the current market scenario in Telecom Sector. Commercial viability of the study: In today’s scenario, communication has become much faster day by day by telephones, internet, media etc. One of them is a growth of telecom sector. Today many organizations provide services for the telecom purpose. This study will help to understand customer preferences and their satisfaction by the services provided by different organizations
  8. 8. VII in this sector. It will also help to these organizations to form various strategies and getting the results from marketing efforts. Research Methodology: This research consists of primary and secondary research: Primary:- 1. Interaction with customers by filling up of questionnaires. 2. Interview with Sales or Marketing Personnel. Secondary:- 1. Books 2. Internet 3. Articles 4. Magazines/ Project Reports 5. Newspapers
  9. 9. VIII EXECUTIVE SUMMARY The development of the telecom sector has experienced a major process of transformation in terms of its growth, technological content, and market structure in the last decade through policy reforms introduced by the Government. The impetus of these changes is expected to continue, and at a much faster pace. The study aims to analysis that with the increase in competition in telecom services, higher levels of consumer satisfaction with affordable prices and improved quality of services achieving or not. Wireless telephony and the Internet are expected to be the preferred means of communication as convergence of telecommunications, broadcasting, and information technology progresses. The study also shows the supportive policy framework needs to be in place during this period of rapid growth and transformation. The Government has undertaken the implementation telecom policy with utmost earnestness, in letter and spirit to usher in competition in almost all the service sectors. The migration package to revenue sharing in place of a fixed license fee, has led
  10. 10. IX to a virtual ‘take off” in growth of the cellular and basic service sectors. National and International data connectivity has been opened. Liberalization of telecom sector of the Indian economy aims at improving accessibility, availability, reliability and connectivity through private sector participation and to bring about much needed improvement in the Quality of Service. Through increased competition, the service providers are expected to become more sensitive and responsive to the customers needs and choices and endeavor to give him greater satisfaction. The Telecom Regulatory Authority of India (TRAI) has the mandate to safeguard the customer’s interests and to set the standards of quality of service. The rapid technological advances which have taken place in the telecom sector have brought about significant improvements in the quality of service provided to customers. With the digitization of exchanges, and upgradation of external network, the fault rate has come down.
  11. 11. X INDEX PRELIMINARIES Letter of Consent…………………………………………………………….I Letter of Approval………………………………………………………......II Preface……………………………………………………………………. III Acknowledgement…………………………………………………………IV Synopsis……………………………………………………………………VI Executive Summary……………………………………………………...VIII List of Figures……………………………………………………………..XII List of Tables……………………………………………………………..XIII LITERATURE REVIEW Chapter 1: An Introduction to Indian Telecom Sector 1.1: History and reforms in Indian Telecom Sector…………………1 1.2: Indian Telecom Policy…...……………………………………...2 Chapter 2: GSM vs. CDMA 2.1: GSM and CDMA facts………………………………………….8 Chapter 3: Growth Drivers 3.1: Industry growth drivers……..…………………………………13 3.2: Segmentation of Indian Telecom Market……………………...14 3.3: Market factors………………………………………………….17 3.4: Success factors…………………………………….…………...18 Chapter 4: Telecom operators 4.1: Introduction...………………………………………………….24 4.2: Mobile service providers…………...………………………….24 Chapter 5: Different operators segment 5.1: Introduction to various segments……………………………...47 5.2: Public vs. Private……………………………………………...58 5.3: Licensing issues in India……………………………………....59 Chapter 6: Rural Market 6.1: Introduction……………………………………………………60
  12. 12. XI 6.2: Growth of telecom services in rural market…………………...60 Chapter 7: Foreign Direct Investments in Indian Telecom 7.1: Introduction……………………………………………………64 7.2: Effects of FDI in Indian Telecom……………………………..66 Chapter 8: 3G Spectrums 8.1: What is 3G?................................................................................68 8.2: What is Spectrum?......................................................................69 8.3: Difference between 1G, 2G and 3G…………………………....69 8.4: 3G issues for service providers and users……………………...70 8.5: Suggestions for spectrum issues……………………………….70 8.6: 3G auction/allocation………………………………………….71 Chapter 9: Value Added Services 9.1: Introduction……………………………………………………73 9.2: Various Value added services…………………………………73 9.4: Challenges……………………………………………………..75 9.5: Future trends…………………………………………………..75 FEASIBILITY STUDY Chapter 10: Research Methodology 10.1: Research Objective…………………………………………...77 10.2: Samples………………………………………………………77 10.3: Observations and Findings…………………………………...78 Chapter 11: SWOT Analysis of Indian Telecom………………………111 Chapter 12: Future of Indian Telecom………………………………...114 Chapter 13: Conclusion and Recommendations 13.1: Conclusion…………………………………………………..117 13.2: Recommendations…………………………………………...119 Bibliography…………………………………………………………………………124 Abbreviations……………………………………………………………..126 Annexures: Article and Questionnaire………………………………………. …129 Response Sheets…………………………………………………………..142
  13. 13. XII LIST OF FIGURES Figure 1: Growth of subscriber base from 1998 to 2007..…………........................3 Figure 2: Operator-wise Market Share of GSM service providers as on 30th September 2007………………………………………………………….10 Figure 3 Operator-wise Market Share of CDMA Wireless as on 30th September 2007…...……………………………………………………...10 Figure 4: Wireless including WLL for October 2007…………………….............11 Figure 5: Segmentation in the Indian Telecom Consumer Market………...........14 Figure 6: Market factors…………………………………………………………...18 Figure 7: Success factors…………………………………………………...............19 Figure 8: Urban+Rural wireline market share……………………………...........28 Figure 9: Telecom service providers market shares for 31st March-2007…........31 Figure 10: Private and Public players market share……………………..............48 Figure 11: India’s telephony tele-density by March 2008………………………..48 Figure 12: Total wireless subscribers by September 2007……………………….51 Figure 13: Internet subscriber base for 3rd quarter in 2007………………..........52 Figure 14: Growing share of private sector by December 2007…………............58 Figure 15: Urban+Rural tele density by December 2007………………………...61 Figure 16: Rural wireline subscribers by September 2007………………............62 Figure 17: Market share of rural wireline subscribers on 30th September 2007............................................................................…………………..63 Figure 18: FDI equity inflows in Telecom from April-October for the year 2007-08………………………………………………………………….65
  14. 14. XIII LIST OF TABLES Table 1: Evolution of telecom industry……………………………………..............1 Table 2: GSM and CDMA subscription numbers………………………………....8 Table 3: BSNL’s financial facts………………………………………………........25 Table 4: Telecom service providers’ financial facts of 4th quarter for the year 2008………………………………………………………………………..26 Table 5:Airtel’s financial facts for the year March 2007-08……………………..30 Table 6: Reliance communication’s financial facts by March-2008……………..36 Table 7: Broadband subscribers’ growth from March-2006 to July-2007……...52
  15. 15. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 1 Chapter 1: INTRODUCTION 1.1] History and Reforms in Indian Telecom Sector:- India’s telecom sector has been doing exceptionally well in past decade. Its structural and institutional reforms have provided tremendous growth opportunity to this sector. India has nearly 200 million telephone lines making it the third largest network in the world after China and USA. With a growth rate of 45%, Indian telecom industry has the highest growth rate in the world. The first reforms in Indian telecommunications sector began in 1980s when the private sector was allowed in telecommunications equipment manufacturing. In 1985, Department of Telecommunications (DOT) was established. Evolution of the industry-Important Milestones Year History of Indian Telecommunications 1851 First operational land lines were laid by the government near Calcutta (seat of British power) 1881 Telephone service introduced in India 1883 Merger with the postal system The Indian Institute of Planning & Management-Ahmedabad
  16. 16. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 2 1923 Formation of Indian Radio Telegraph Company (IRT) 1932 Merger of ETC and IRT into the Indian Radio and Cable Communication Company (IRCC) 1947 Nationalization of all foreign telecommunication companies to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications 1985 Department of Telecommunications (DOT) established, an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system) 1986 Conversion of DOT into two wholly government-owned companies: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas. 1997 Telecom Regulatory Authority of India created. 1999 Cellular Services are launched in India. New National Telecom Policy is adopted. 2000 DoT becomes a corporation, BSNL 1.2] Indian Telecom Policy:- After 1991’s liberalization in Government’s policies, the telecom sector has allowed various private players to enter into the Indian market. Earlier, sector was operating under public sector giants like Bharat Sanchar Nigam Limited (BSNL), Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL) but after the National Telecom Policy (NTP) by Government in 1994 many private players entered in Indian The Indian Institute of Planning & Management-Ahmedabad
  17. 17. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 3 telecommunication market. But this market is regulated by Telecommunication Regulatory Authority of India (TRAI). It acts as an independent regulator of the business of telecommunications in the country which was set up in 1997 by the government of India. (Source: TRAI Report 2006-07) Indian telecommunications today benefits from among the most enlightened regulation in the region, and arguably in the world. The sector, sometimes considered the “poster-boy for economic reforms,” has been among the chief beneficiaries of the post-1991 liberalization. Unlike electricity, for example, where reforms have been stalled, telecommunications has generally been seen as removed from “mass concerns,” and thus less subject to electoral calculations. Market oriented reforms have also been facilitated by lobbying The Indian Institute of Planning & Management-Ahmedabad
  18. 18. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 4 from India’s booming technology sector, whose continued success of course depends on the quality of communications infrastructure. Despite several hiccups along the way, the Telecom Regulatory Authority of India (TRAI), the independent regulator, has earned a reputation for transparency and competence. With the recent resolution of a major dispute between cellular and fixed operators, Indian telecommunications already among the most competitive markets in the world appears set to continue growing rapidly. While telecom liberalization is usually associated with the post-1991 era, the seeds of reform were actually planted in the 1980s. At that time, Rajiv Gandhi proclaimed his intention of “leading India into the 21st century,” and carved the Department of Telecommunications (DOT) out of the Department of Posts and Telegraph. For a time he also even considered corporatizing the DOT, before succumbing to union pressure. In a compromise, Gandhi created two DOT-owned corporations: Mahanagar Telephone Nigam Limited (MTNL), to serve Delhi and Bombay, and Videsh Sanchar Nigam Limited (VSNL), to operate international telecom services. He also introduced private capital into the manufacturing of telecommunications equipment, which had previously been a DOT monopoly. The Indian Institute of Planning & Management-Ahmedabad
  19. 19. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 5 These and other reforms were limited by the unstable coalition politics of the late 1980s. It was not until the early 1990s, when the political situation stabilized, and with the general momentum for economic reforms, that telecommunications liberalization really took off. In 1994, the government released its National Telecommunications Policy (NTP-94), which allowed private fixed operators to take part in the Indian market for the first time (cellular operators had been allowed into the four largest metropolitan centers in 1992). Under the government’s new policy, India was divided into 20 circles roughly corresponding to state boundaries, each of which would contain two fixed operators (including the incumbent), and two mobile operators. As ground-breaking as NTP-94 was, its implementation was unfortunately marred by regulatory uncertainty and over-bidding. A number of operators were unable to live up to their profligate bids and, confronted with far less lucrative networks than they had supposed, pulled out of the country. As a result, competition in India’s telecom sector did not really become a reality until 1999. At that time the government’s New Telecommunications Policy (NTP-99) switched from a fixed fee license to a revenue sharing regime of approximately 15%. This figure has subsequently been lowered (to 10%- The Indian Institute of Planning & Management-Ahmedabad
  20. 20. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 6 12%), and is expected to be reduced even further over the coming years. Still, India continues to derive substantial revenue from license fees ($800 million in 2001-2002), leading some critics to suggest that the government has abrogated its responsibilities as a regulator to those as a seller. Another, perhaps even more significant, problem with India’s initial attempts to introduce competition was the lack of regulatory clarity. Private operators complained that the licensor – the DOT – was also the incumbent operator. The many stringent conditions attached to licenses were thus seen by many as the DOT’s attempt to limit competition. It was in response to such concerns that the government in 1997 set up the Telecom Regulatory Authority of India (TRAI), the nation’s first independent telecom regulator. Over the years, TRAI has earned a growing reputation for independence, transparency and an increasing level of competence. Early on, however, the regulator was beleaguered on all fronts. It had to contend with political interference, the incumbent’s many challenges to its authority, and accusations of ineptitude by private players. Throughout the late 1990s, TRAI’s authority was steadily whittled away in a number of cases, when the courts repeatedly held that regulatory power lay with the central government. It was not until 2000, with the passing of the TRAI The Indian Institute of Planning & Management-Ahmedabad
  21. 21. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 7 Amendment Act, that the regulatory body really came into its own. Coming just a year after NTP-99, the act marks something of a watershed moment in the history of India telecom liberalization. Today, there are many private players like Vodafone, Airtel, Tata, Reliance, Idea etc. There are basically two areas in which these players operate: Fixed and Cellular Services. In Fixed line, MTNL and BSNL have captured major part of the market. Whereas, Cellular Services, can be further divided into two parts: Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). The Indian Institute of Planning & Management-Ahmedabad
  22. 22. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 8 Chapter 2: GSM vs. CDMA 2.1] GSM and CDMA facts:- GSM segment consists of players like Airtel, Vodafone, Idea, and BSNL. Whereas, CDMA segment consists of players like Reliance, Tata etc. GSM and CDMA subscription numbers: GSM CDMA CDMA GSM Subscribers Year Annual Subscribers Annual (millions) Growth (millions) Growth 2000 3.1 94% - - 2001 5.05 76% - - 2002 10.5 91% 0.8 - 2003 22.0 110% 6.4 700% 2004 37.4 70% 10.9 70% 2005 58.5 57% 19.1 75% 2006 105.4 80% 44.2 131% 2007 180.0 71% 85.0 92% (Source: COAI report) As per Cellular Operator Association of India (COAI), India's GSM telecom service providers added 5.92 millions new subscribers in February, taking their total customer base up to 184.67 millions. In January, they had added 6.19 millions new users. At the end of February last year, the total GSM subscriber base stood at 115.29 millions while the same was 178.41 millions The Indian Institute of Planning & Management-Ahmedabad
  23. 23. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 9 as at January 31, 2008. Customers in the Metro Circle rose by 38.3% from the year earlier to 29.49 millions, while in the A Circle the user base grew by 64.7% from last year's level to 67.08 millions. Growth in the B Circle jumped by 63.6% to 67.19 millions and the C Circle subscribers expanded by 71.54% to 20.9 millions. Company wise break-up shows that Bharti Airtel, leader in the GSM space, added 2.25 millions new customers last month while Vodafone Essar saw its subscriber base swell by 1.41 millions new users. Idea Cellular added 918,871 new customers and Spice Communications added 141,377 new users. State-run BSNL added around 0.8mn new customers last month. At the end of February, Bharti Airtel held a market share of 32.31% with a total of 59.67 millions customers, while Vodafone Essar had a market share of 23.04% at 42.55 millions subscribers. BSNL accounted for 18.72% of the GSM market at 34.57 millions customers and Idea held a market share of 12.39% at 22.87 millions. India presently follows a CPP model, whereby calling party pays. Incoming calls were made free since April 1, 2002 and that has substantially boosted the subscriber growth rate in India. However, making incoming calls free reduced operators’ ARPU. The Indian Institute of Planning & Management-Ahmedabad
  24. 24. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 10 Operator-wise Market Share of GSM service providers as on 30th September 2007 (Source: TRAI Report 2007-08) Operator-wise Market Share of CDMA Wireless as on 30 September 2007 (Source: TRAI Report 2007-08) 1% 6% Reliance Tata 36% MTNL 57% BSNL The Indian Institute of Planning & Management-Ahmedabad
  25. 25. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 11 According to TRAI report, the total number of mobile subscribers by the March 31,2008 were 261.08 million as against last year’s 165.09 millions (58.14% increment), which was 56.89 millions subscribers across India. This figure shows that in just within three years, the number of mobile subscribers has amplified over 4.5 times. In May 2008, there were 316.97 millions subscribers were added including 8.5 millions subscribers of wireless market. Total wireless subscribers 277.92 millions were added in this month. Wireless-including WLL for October-07 8.9 17.1 Vodafone 9.3 BSNL 1.6 1.4 Airtel Rcom 16.1 MTNL 17.4 Spice Tata IDEA 23.4 (Source: TRAI Report 2007-08) The Indian Institute of Planning & Management-Ahmedabad
  26. 26. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 12 DoT has told to review of call termination charges to TRAI to make them on cost-based which may fall tariff charges significantly. Termination charges are the ones paid by a telecom operator from whose network call originates to a service provider on which call terminates. Currently the charges for that are 0.30 which are very high. They were fixed in 2003. If the charges are reduced, the service providers would have to forego some portion of their revenues. On the other hand, high termination charges may smother the competition and may disturb the level playing field. The Indian Institute of Planning & Management-Ahmedabad
  27. 27. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 13 Chapter 3: GROWTH DRIVERS 3.1] Industry Growth Drivers:- Fixed Line Segment. Capacity expansion of fixed line exchanges helped consumers avail quick connections. Quick connection availability boosted number of fixed line connections during 1985 – 1995. Wireless Segment. Vast geographic expanse of India acted as a catalyst to boost mobility. Low call costs since 2002 fueled the wireless segment. Narrowing gap of call costs between fixed and wireless convinced customers to subscribe to wireless connections. Nationwide roaming facilities on GSM. SMS facility. Internet + Subscription bundling. Reduced cost of handsets (affordability factor). Customs duties have been reduced from 10% to 5%. The Indian Institute of Planning & Management-Ahmedabad
  28. 28. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 14 In remote areas where providing fixed line connections were difficult, wireless did the magic. CDMA fixed wireless gave customers 3 in one advantage – mobility, internet and easy access. Many telecom service providers provide Global Calling Card (GCC) to their customers. These cards help them to make calls from the foreign countries and it saves up to 80-90% in international roaming. 3.2] Segmentation of the Indian Telecom Consumer Market:- With the proliferation of mobile phone users, several micro segments have also emerged lately, each with their own specific needs. The Indian Mobile consumer market has been segmented as follows: (Source: India Cellular) The Indian Institute of Planning & Management-Ahmedabad
  29. 29. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 15 The rationale behind the above segmentation is to identify customers on the basis of their stage in life and hence to tailor-make schemes for each customer segment. The different segments are explained as follows: Youth:- Over the years, service providers have started giving greater attention to this segment, as it has emerged as one of the biggest users of mobile phones. For the youth, mobile phones are not just a necessity, but rather an indispensable accessory. This segment particularly values prepaid schemes with free SMS services. It is further differentiated into various micro-segments based on age and gender. For instance, youngsters in the age group of 19 to 23 years generally have a large circle of friends and more access to money. Companies thus focus on providing services like group talk and group SMS to these people. This segment is very dynamic as its needs keep changing very frequently, driven by the latest trends and fads. For instance, downloading new ring-tones is the latest fad among the youth today. This is a huge revenue source for service providers and so they need to keep up with the changing tastes of this segment. The Indian Institute of Planning & Management-Ahmedabad
  30. 30. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 16 Young Professionals:- People entering the workforce and thus moving out of the dependent bracket constitute this market segment. They generally prefer using post paid schemes with value added services like information about stock markets, news updates and so on. Small and Medium Enterprise:- This segment mainly consists of people who are switching over from landlines to mobile phones, seeking a cost advantage. The focus here is on economy-packages rather than value added services. Family:- Family as a segment consists of more number of dependents. These dependants are serviced by prepaid schemes. Geographically dispersed families tied by the same cellular service providers may get cost advantages in terms of lower pulse rates. The Indian Institute of Planning & Management-Ahmedabad
  31. 31. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 17 Special:- The ‘Special’ category includes a small but growing segment which requires largely customized services sought by celebrities, politicians, CEOs and the super-rich. Tailor made schemes for each segment have been a great success so far. This customization, however, has reached such a stage that every service provider has numerous schemes being provided at the same time. Being short term schemes, they keep changing frequently and customers thus start switching from one service provider to another based on the attractiveness of the scheme. This has brought down customer loyalty and hence service providers are finding it difficult to retain existing customers. It is estimated that in the near future the plethora of schemes provided by the different service providers will stop being a differentiating factor. 3.3] Market Factors:- There are basically two market factors which are considered while segmenting the market as well as deciding the strategic moves for the markets and competition. 1) Strategic Factors 2) Economic Factors The Indian Institute of Planning & Management-Ahmedabad
  32. 32. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 18 (Source: microsite mobile) 3.4] Success Factors:- It is very important for any company or service provider to stay in the market for a long period otherwise it will be out of the market and suffer a lot. To taste the success, companies have to perform well continuously and make their customers happy all the time by proper CRM and other techniques. Apart from that, there are two types of factors for these companies: (1) shall have and (2) must have factors. The Indian Institute of Planning & Management-Ahmedabad
  33. 33. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 19 (Source: Bernhard Goldberger- 19th Bled e-Conference eValues) 1) Shall Have Factors: Social relationships: Humans are social beings. They interact constantly with each other and social relationships are a vital part of life. The mobile phone is perfectly suited to satisfy the need of maintaining social relationships. Services that support social relationships are likely to be successful. The Indian Institute of Planning & Management-Ahmedabad
  34. 34. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 20 Power: One important aspect of social relations is status which is strongly related to power. Two types of power can be distinguished: Power to access and power to execute. The first type of power refers to the possibility to intervene in other people’s life, as for instance parents influencing the life of their children. But also the limitation of the power to access can be useful. One famous example is SMS (Short Message Service). They provide the opportunity to communicate without giving the receiver the chance to reply directly. This way unpleasant information can be communicated. EQM (Easier, Quicker, More): Easier means that solutions that are simpler and/or more convenient are accepted by customers. One good example for “easier” is the phonebook of cell phones (compared to typing in the complete number when you call someone). Quicker refers to the opportunity to fulfill customer needs faster than traditional products. One of the reasons why e-mails are common nowadays is that they are faster than traditional letters. The Indian Institute of Planning & Management-Ahmedabad
  35. 35. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 21 More is related to the fact that humans tend to maximize their benefits. Thus they will welcome every new product allowing them to increase their benefit. Entertainment: There are two types of entertainment: “scheduled” entertainment, such as visiting a theatre and entertainment during niche times, for example when waiting for public transport. In such time slots a mobile phone can be the perfect entertainment or gaming console. Security: Security is one of the most important needs of humans. Because of security provided by service providers, the information of users is kept confidential. Apart from that, there can’t be any manipulation done in case of post-paid bills and various services provided as user can have an idea specially in case of pre-paid customers where regular balance can be checked. The Indian Institute of Planning & Management-Ahmedabad
  36. 36. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 22 (2) Must Have Factors: The 3 minute value: The average WAP application takes five minutes. In Japan the popular i-mode applications last for less than one and a half minutes on average. The time a customer uses an application may vary from country to country. However, it is quite evident, that a mobile application has to produce a clear, perceived value for the customer within a short period of time. As a rule of thumb the value should be delivered within 3 minutes. Simplicity: The services provided to the customers should be simple. It should be easy to understand and the customer should be able to use the services intuitionally like GPRS, caller tunes etc. Thus the usability has to meet the customer’s standards. Additional benefit: For a successful service it is essential that the customer perceives a clear additional value. There are several types of additional values. For example fun, cost saving, time saving or location based additional value. The Indian Institute of Planning & Management-Ahmedabad
  37. 37. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 23 Customer friendly tariff structure: The willingness to pay for new technologies and new applications is limited since the customer cannot clearly judge the additional benefit a new application yields. This is especially true for B2C markets where the customers tend to be more prices sensitive. For this reason a customer friendly price structure, preferably with a price model that eases diffusion of a new application, is essential. The Indian Institute of Planning & Management-Ahmedabad
  38. 38. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 24 Chapter 4: TELECOM OPERATORS 4.1] Introduction:- There are three types of players in telecom services: • State owned companies (BSNL and MTNL) • Private Indian owned companies (Reliance Infocomm, Tata Teleservices,) • Foreign invested companies (Vodafone, Bharti Tele-ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communications) 4.2] Mobile Service Providers:- BSNL: On October 1, 2000 the Department of Telecom Operations, Government of India became a corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). BSNL is now India’s leading Telecommunications Company and the largest public sector undertaking. It has a network of over 45 million lines covering 5000 towns with over 35 million telephone connections. The Indian Institute of Planning & Management-Ahmedabad
  39. 39. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 25 The state-controlled BSNL operates basic, cellular (GSM and CDMA) mobile, Internet and long distance services throughout India (except Delhi and Mumbai).The aim is to provide a telephone density of 9.9 per hundred by March 2007. BSNL, which became the third operator of GSM mobile services in most circles, is now planning to overtake Bharti to become the largest GSM operator in the country. BSNL is also the largest operator in the Internet market, with a share of 21 per cent of the entire subscriber base. BSNL's estimated total capital outlay for 2008/09 will rise to 185.91 billion rupees ($4.7 billion) from 140.65 billion rupees in 2007/08. (Amount in lakhs) Profit before tax Rs. 815381 Profit after tax Rs. 780587 Earning per share Rs. 14.03 Turnover Rs. 3461621 (Source: BSNL’s balance sheet 2006-07) Recently, BSNL has done a very good business in last quarter of 2008 i.e. at the end of the March-2008; it has left behind all other telecom service providers. It had sales of Rs. 10747.79 crores. The Indian Institute of Planning & Management-Ahmedabad
  40. 40. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 26 Telecom service providers at the end of Q4 for the year 2008:- Company Sales( Rs. in crores) BSNL 10747.79 Bharti 8381 Vodafone 4681.44 Rcom 4318.74 Idea 2150.84 Tata Teleservices 2057.30 (Source: The Economic Times) BSNL is also operating in landline, WLL, mobile, internet (BSNL broadband) etc. It has been doing very well in landline and internet connections as it is a leader in both these segments. BSNL broadband gives following benefits: • High speed Internet Access: This is the always-on Internet access service with speed ranging from 256 kbps to 8 Mbps. • Bandwidth on Demand: This will facilitate customer to change bandwidth as per his / her requirement. For example a customer with The Indian Institute of Planning & Management-Ahmedabad
  41. 41. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 27 256 kbps can change to 1 Mbps during the video Conferencing session. • Multicasting: This is to provide video multicast services for application in distance education, telemedicine etc • Dial VPN Service: This service allows remote users to access their private network securely over the NIB-II infrastructure. For example, Virgin Mobile and TTSL. • Video and Audio Conferencing • Content based Services: Like Video on Demand, Interactive Gaming, Live and time shifted TV. The subscriber base in fixed line telephony segment has been increasing over the last few years. Whereas, in Feb 2005, there were 45.59 million fixed line subscribers, 79% of which are controlled by BSNL, this number grew by 8% to 49.21 million in Feb 2006. But mobile substitution is now starting to take gradually hold. In Jan 2007, fixed line subscriber growth was negative, with a loss of 300,000 lines. The official figure now stands at 40.40 million at the end of Jan 2007. This includes a correction of WLL subscribers which are now counted towards wireless subscribers. BSNL held on to 84%, MTNL to 9% and other private sector The Indian Institute of Planning & Management-Ahmedabad
  42. 42. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 28 operators to 7% of fixed lines. BSNL has an almost 100% market share of rural fixed (wire) lines. Total (Urban+ Rural) wire line market share (Source: TRAI report 2007-08) Here, it clearly shows that BSNL is a clear winner of a fixed line market share with around 86% combining rural and urban area. Recently, BSNL has reduced STD rates by 50% which will be affected to pre-paid and post paid customers as well as landline subscribers. BSNL is also going to invest Rs. 5000 crores for the project of WiMax facility across India. The company wants to provide wireless broadband connectivity through this technology which will start in Maharashtra (except Mumbai), Gujarat and Andhra The Indian Institute of Planning & Management-Ahmedabad
  43. 43. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 29 Pradesh initially. BSNL is currently waiting for the required spectrum frequency to launch this facility. For this technology, BSNL has also tied up with Soma Networks for the purpose of WiMax technology. BHARTI AIRTEL: Established in 1985, Bharti has been a pioneering force in the telecom sector with many firsts and innovations to its credit, ranging from being the first mobile service in Delhi, first private basic telephone service provider in the country, first Indian company to provide comprehensive telecom services outside India in Seychelles and first private sector service provider to launch National Long Distance Services in India. Bharti Tele-Ventures Limited was incorporated on July 7, 1995 for promoting investments in telecommunications services. Its subsidiaries operate telecom services across India. Bharti’s operations are broadly handled by two companies: the Mobility group, which handles the mobile services in 16 circles out of a total 23circles across the country; and the Infotel group, which handles the National Long Distance (NLD), International Long Distance (ILD), fixed line, broadband, data, and satellite-based services. Together they have so far deployed around 23,000 km of optical fiber cables across the country, coupled with approximately 1,500 nodes, and presence in around 200 The Indian Institute of Planning & Management-Ahmedabad
  44. 44. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 30 locations. The group has a total customer base of 6.45 million, of which 5.86 million are mobile and 588,000fixed line customers, as of January 31, 2004. In mobile, Bharti’s footprint extends across 15 circles. Recently, Bharti has planned to merge with MTN and bid was $ 22 billion. It has planned to acquire it with 60% cash and rest with equity part. MTN is one of the biggest telecom operators mainly in South Africa and apart from that Iran, Nigeria etc. It has a network in 21 countries with 6.8 billion customers. This merger will be world’s fifth largest merger. But right now this merger is abolished as MTN wanted the amount of $ 50 billion whereas Bharti was ready to buy at $ 45 billion. Bharti has also tied up with Apple for i-phone. Particulars March 07-08(in US $ million) Income 6658 EBITDA 2803 Net Profit 1669 Net Debt 1042 Debt/Equity 19% Debt/EBITDA 0.37% (Source: Company Reports & City Investment Research Estimates) The Indian Institute of Planning & Management-Ahmedabad
  45. 45. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 31 Telecom service providers market shares for 31st March-07 BSNL(GSM) 19% 15% Airtel(GSM) 10% Vodafone(GSM) 29% 9% 18% Idea(GSM) Tata(CDMA) Reliance(CDMA+ GSM) (Source: India-Cellular) Like any other telecom service provider, Bharti also considers information technology a key driver of its business. The service provider has a WAN set- up in place; it has a mix of leased lines and E1 and E3 lines for wide area connectivity. The company also has an extranet in place through which it extends different applications to its dealers and partners. In a telecom services company like Bharti, airtime is considered a product. It is vital for Bharti to manage the expectations of its customers and provide them with innovative products and services in a manner which makes them loyal. So Bharti implemented CRM tool. Today Bharti is using the Oracle CRM platform. Before choosing its CRM tool, Bharti evaluated many options. It considered factors like proper workflow automation, facilitation of knowledge sharing, and integration with the billing system. After a thorough evaluation, it decided to go ahead with the Oracle CRM platform. The Indian Institute of Planning & Management-Ahmedabad
  46. 46. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 32 Strategy has also played a major role in improving customer service at Airtel. After starting its services in Delhi, Bharti acquired lot of circles and sought new licenses in other circles; whenever they got a new license, they implemented the CRM tool immediately. But they had to put in a migration strategy in those acquired circles which had an existing subscriber base. The CRM strategy at Airtel revolves around two aspects: operational CRM and analytical CRM. The first is about helping their call centres in the workflow part, helping them in their day-to-day activities. The second provides staff with the required information on customers; this is used for business development activities. Together they help Bharti provide better services to its customers. Apart from that, now Bharti has come up with new service i.e. if the customer has lost his mobile, still he can get back his all the data of that mobile including video files, calendar, pictures, messages, music files, events, tasks etc. This facility will be free of cost. But this facility can be useful in high-end handsets only and to get the data back, a user needs to have his user id and PIN number. Bharti has made a deal with companies of Malaysia and Indonesia for back-up services to get the data back. This way, Bharti has come up with new innovations with new technologies which ultimately benefit the end users and CRM increases. The Indian Institute of Planning & Management-Ahmedabad
  47. 47. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 33 MTNL: MTNL was set up on 1st April 1986 by the Government of India to upgrade the quality of telecom services, expand the telecom network, and introduce new services and to raise revenue for telecom development needs of India’s key metros – Delhi, the political capital, and Mumbai, the business capital. In the past 17 years, the company has taken rapid strides to emerge as India’s leading and one of Asia’s largest telecom operating companies. The company has also been in the forefront of technology induction by converting 100% of its telephone exchange network into the state-of-the-art digital mode. The Govt. of India currently holds 56.25% stake in the company. In the year 2003-04, the company's focus would be not only consolidating the gains but also to focus on new areas of enterprise such as joint ventures for projects outside India, entering into national long distance operation, widening the cellular and CDMA-based WLL customer base, setting up internet and allied services on an all India basis. The market for fixed wireline phones is stagnating, MTNL faces intense competition from the private players—Bharti, Hutchison and Idea Cellular, Reliance Infocomm—in mobile services. MTNL recorded sales of Rs. 60.2 billion ($1.38 billion) in the year 2002-03, a decline of 5.8 per cent over the The Indian Institute of Planning & Management-Ahmedabad
  48. 48. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 34 previous year’s annual turnover of Rs.63.92 billion. There has been a tremendous increase in the Cellular subscriber base as MTNL has added a total of 286971 cellular subscribers and total cellular subscriber had increased to 3241851 as on 31.03.2008. MTNL’s financial performance was also good despite the competition. Its turnover was Rs. 5582.85 crores in 2006-07. It had Profit before Tax of Rs. 792.68 crores in the same financial year. Its net profit was Rs. 681.74 crores in the same year. MTNL has tied up with handset manufacturers Nokia and Samsung for limited mobility services using wireless in the local loop (WLL-M) services. RELIANCE INFOCOMM: Reliance Infocomm is now known as Reliance Communications (RCom). Reliance Communications Limited founded by the late Shri Dhirubhai H Ambani (1932-2002) is the flagship company of the Reliance Anil Dhirubhai Ambani Group. The Reliance Anil Dhirubhai Ambani Group currently has net worth in excess of Rs. 55,000 crores. Reliance Communications corporate clientele includes 1,850 Indian and multinational The Indian Institute of Planning & Management-Ahmedabad
  49. 49. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 35 corporations, and over 250 global carriers. It is also an integrated telecom service provider with licenses for mobile, fixed, domestic long distance and international services. Reliance Communications offers a complete range of telecom services, covering mobile and fixed line telephony including broadband, national and international long distance services, data services and a wide range of value added services and applications. Reliance IndiaMobile, the first of Rcom’s initiatives was launched on December 28, 2002. This marked the beginning of Reliance's vision of ushering in a digital revolution in India by becoming a major catalyst in improving quality of life and changing the face of India. Reliance Infocomm plans to extend its efforts beyond the traditional value chain to develop and deploy telecom solutions for India's farmers, businesses, hospitals, government and public sector organizations. Until recently, Reliance was permitted to provide only “limited mobility” services through its basic services license. However, it has now acquired a unified access license for 18 circles that permits it to provide the full range of mobile services. It has rolled out its CDMA mobile network and enrolled more than 6 million subscribers in one year to become the country’s largest mobile operator. It now wants to increase its market share and has recently The Indian Institute of Planning & Management-Ahmedabad
  50. 50. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 36 launched pre-paid services. Having captured the voice market, it intends to attack the broadband market. Rcom is currently having a subscriber base of around 4.8 crores. It has got license to operate in Sri Lanka and Uganda. Rcom will provide telecom coverage to 234000 villages by setting up 8982 sites in the remotest parts of India by the end of FY 2007. Rcom has recently acquired UK based VANCO Group and it has also bid for MTN after Airtel. And now it is ready to acquire it by giving 61% equity share to MTN which is allowed up to 74% to foreign investors as per the norms. Currently, MTN is having the subscriber base of around 6.8 crores. MTN has an income of $ 9.7 billions and operating profit of $ 4.1 billions as per FY 2007-08. The financial details of Rcom for March-2008 are as under: Particulars March-2008 Net Profit Rs. 5401 crores EBITDA Rs. 8199 crores Net Debt/Equity Ratio 0.39:1 Revenues Rs. 19068 crores (Source: Rcom press release) The Indian Institute of Planning & Management-Ahmedabad
  51. 51. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 37 If MTN and Rcom could have got combined, they would have maximum number of subscribers as well as they would have been the fourth largest operators and second highest market after China but somehow the deal between Rcom and MTN mobile could not be executed because of some legal issues. Rcom has done a joint venture with Alcatel-Lucent to offer Managed Network Services to Telcos across the globe. Merging company of Rcom and MTN will be listed in London. o FLAG TELECOM: Flag Telecom is rebranded as Reliance Globalcom. Reliance Globalcom, a division of Reliance Communications, manages the Global Telecom operations of India’s largest Integrated Telecom Service Provider. The company serves a customer base of over 1200 enterprises, 200 carriers and 1.5 million retail customers in 50 countries across 5 continents. The company operates 'Reliance FLAG' which is the world’s largest private undersea cable system spanning 65,000 km. This is seamlessly integrated with 110,000 km of domestic optic fiber of Reliance Communications connecting it to 40 key business destinations in India, the Middle East, Asia, The Indian Institute of Planning & Management-Ahmedabad
  52. 52. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 38 Europe, and the U.S. Reliance Globalcom’s Enterprise Division (formerly Yipes Inc.) provides managed Ethernet and application delivery services for the global enterprise. Reliance Globalcom also recently acquired Global Wimax operator called Ewaves and a leading Virtual network operator - Vanco Group. TATA TELESERVICES: Tata Teleservices (TTSL) is a part of the $12 billion Tata Group, which has 93 companies, over 200,000 employees and more than 2.3 million shareholders. Tata Teleservices provides basic (fixed line services), using CDMA technology in six circles: Maharashtra (including Mumbai), New Delhi, Andhra Pradesh, Tamil Nadu, Gujarat, and Karnataka. It has over 800,000 subscribers. It has now migrated to unified access licenses, by paying a Rs. 5.45 billion ($120 million) fee, which enables it to provide fully mobile services as well. The company is also expanding its footprint, and has paid Rs. 4.17 billion ($90 million) to DoT for 11 new licenses under the IUC (Interconnect Usage Charges) regime. The new licenses, coupled with the six circles in which it already operates, virtually gives the CDMA mobile operator a national footprint that is almost on par with BSNL and Reliance The Indian Institute of Planning & Management-Ahmedabad
  53. 53. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 39 Infocomm. The company hopes to start off services in these 11 new circles by August 2004. These circles include Bihar, Haryana, Himachal Pradesh, Kerala, Kolkata, Orissa, Punjab, Rajasthan, Uttar Pradesh (East) & West and West Bengal. Tata Teleservices’ bouquet of telephony services includes Mobile services, Wireless Desktop Phones, Public Booth Telephony and Wire line services. Other services include value added services like voice portal, roaming, post- paid Internet services, 3-way conferencing, group calling, Wi-Fi Internet, USB Modem, data cards, calling card services and enterprise services. Tata Indicom redefined the existing prepaid mobile market in India, by unveiling their offering – Tata Indicom ‘Non Stop Mobile’ which allows customers to receive free incoming calls. Tata Teleservices today has India’s largest branded telecom retail chain and is the first service provider in the country to offer an online channel to offer postpaid mobile connections in the country. TTSL has a 3G-ready telecom infrastructure in partnership with Motorola, Ericsson, Lucent and ECI Telecom. Recently, Virgin Mobiles with TTSL by providing them handsets and getting network which is also known as Mobile Virtual Network Operator (MVNO). It is not a known fact that an MVNO is a mobile operator that The Indian Institute of Planning & Management-Ahmedabad
  54. 54. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 40 owns spectrum nor has its own network infrastructure, instead, it buys airtime from cellular operators in bulk and resells it under its own branding. Tata Teleservices is talking with Srei group company Quippo Telecom Infrastructure Limited (QTIL) to merge its tower arm, Wireless Tata Telecom Infrastructure Limited (WTTIL). QTIL has emerged as the top bidder for a 49 per cent stake in TTSL’s tower business. However, as QTIL is an independent tower firm, it can’t compete with WTTIL, in which it will have a 49 per cent stake. With close to 5,000 towers in its portfolio, QTIL is valued at Rs 3,000 crores ($700 million). According to analysts, WTTIL, which has over 10,000 towers under its belt, has an enterprise valuation of over $3.5 billion. The merged entity will command a valuation of around $ 4.5 billions. As per the Profit & Loss A/C of TTSL, on 31st March, 2007, it is running in losses. Its loss after tax is Rs. 310.61 crores. Its EPS is -1.94. TTSL had fixed wireless 1.13 millions as on 31st March, 2007. Apart from that, it had mobile subscribers of 1.64 millions as on 31st March, 2007. The Company continued to focus on Value Added Service (VAS) offerings. The launch of Welcome Tunes (Caller Ringback Tunes), video streaming and other data services and content brought in improved revenues. The Indian Institute of Planning & Management-Ahmedabad
  55. 55. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 41 Tata Telecom and Avaya Inc, a global provider of communications networks, today introduced new software applications and phones that provide greater control over the growing number of communication devices. The new converged communications solutions are based on SIP (Session Initiation Protocol), which enables integration of Internet applications, such as instant messaging, with voice and telephone features such as conferencing, voice mail and click-to-dial capabilities. With a significant presence across the telecom value chain and the possible synergies after the acquisition of VSNL by the TATA group, TATA Teleservices is planning to expand the range of its coverage and services; the advanced communication solutions now include seamless integration of voice, video, data and IP systems. TATA Teleservices is fully equipped to offers a gamut services to customers with a strong commitment to quality of service and customer experience. As a basic telephone services provider, TTSL provides the backbone for India’s corporate leaders such as GE Capital, Wipro, Magnacom Pvt. Limited, Citicorp Overseas software (now called Orbitech), Dr. Reddy’s The Indian Institute of Planning & Management-Ahmedabad
  56. 56. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 42 Labs, Standard Chartered Bank, Motorola India Electronics Limited, TCS and Satyam, in addition to servicing the telecom needs of retail customers. VSNL: On April 1, 1986, the Videsh Sanchar Nigam Limited (VSNL) - a wholly Government owned corporation - was born as successor to Overseas Communication Service (OCS). The company operates a network of earth stations, switches, submarine cable systems, and value added service nodes to provide a range of basic and value added services and has a dedicated work force of about 2000 employees. VSNL's main gateway centers are located at Mumbai, New Delhi, Kolkata and Chennai. The international telecommunication circuits are derived via Intelsat and Inmarsat satellites and wide band submarine cable systems. The company's American Depository Receipt (ADR) is listed on the New York Stock Exchange and its shares are listed on major Stock Exchanges in India. The Indian Government owns approximately 26 per cent equity, M/s Panatone Finvest Limited as investing vehicle of Tata Group owns 45 per cent equity and the overseas holding (inclusive of FIIs, ADRs, Foreign The Indian Institute of Planning & Management-Ahmedabad
  57. 57. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 43 Banks) is approximately 13 per cent and the rest is owned by Indian institutions and the public. The company provides international and Internet services as well as a host of value-added services. Its revenues have declined from Rs. 70.89 billion ($1.62 billion) in 2001-02 to Rs. 48.12 billion ($1.1 billion) in 2002-03, with voice revenues being the mainstay. To reverse the falling revenue trend, VSNL has also started offering domestic long distance services and is launching broadband services. For this, the company is investing in Tata Teleservices and is likely to acquire Tata Broadband. VSNL announced the acquisition of Tyco Global Network for $130 millions in a cash deal. With the acquisition, VSNL piped to the post Reliance, another serious bidder, especially after it bought over US-based FLAG Telecom in January for $211 millions. The acquisition will give the company control over a 60,000 km cable network spread over three continents. VODAFONE: Vodafone is basically the biggest telecom service provider of the U.K which has a market value of 75 billions by June, 2008. Vodafone currently has The Indian Institute of Planning & Management-Ahmedabad
  58. 58. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 44 equity interests in 25 countries and Partner Networks (networks in which it has no equity stake) in a further 42 countries. The name Vodafone comes from Voice Data Fone, chosen by the company to “reflect the provision of voice and data services over mobile phones.” It had agreed to acquire a controlling interest of 67% in Hutchison Essar Limited (Hutch) for US$11.1 billion. At the same time, it agrees to sell back 5.6% of Airtel stake back to the Mittals. Vodafone retained 4.4% stake in Airtel. Vodafone is the world's leading international mobile communications company. It now has operations in 25 countries across 5 continents and 40 partner networks with over 200 million customers worldwide. Vodafone has also tied up with Apple’s i-phone. Vodafone’s revenues have been increased by 50% during the year driven by rapid expansion of the customer base with an average of 1.5 million net additions per month since acquisition. As on 31st March, 2008, Vodafone’s customer base was 260 millions. Its turnover was 35478 millions with a profit of 6756 millions. Vodafone has also tied up with Apple’s i-phone which is going to be launched in India The Indian Institute of Planning & Management-Ahmedabad
  59. 59. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 45 by June-2008. i-phone’s 3G version will be launched with a 50% rate of what it was earlier. IDEA: Indian regional operator IDEA Cellular Ltd. has a new ownership structure and grand designs to become a national player, but in doing so is likely to become a thorn in the side of Reliance Communications Ltd. Idea operates in eight telecom circles or regions in Western India, and has received additional GSM licenses to expand its network into three circles in Eastern India -- the first phase of a major expansion plan that it intends to fund through an IPO. Idea has become fifth largest company with a subscriber base of 3.1 crores customers. Recently, Idea has decided to take over Spice telecom. It has decided to buy 40.8% share in Spice telecom at Rs. 2176 crores. Apart from that, Idea is going to merge with Telecom Malaysian International (TMI) and going to give 15% share to TMI out of 20% open offer. Idea will get $1.7 billions out of that. TMI has 4.4 crores customers in 10 countries. Idea is also planning The Indian Institute of Planning & Management-Ahmedabad
  60. 60. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 46 to invest Rs. 10000 crores for its growth strategy and will start in other parts of the country like Bombay, Bihar, Orissa and Tamilnadu. On 31st March, 2008, Idea’s debt was Rs. 6515.40 crores and equity was Rs. 2639 crores. So, debt-equity ratio was 2.5:1. Idea’s net profit was Rs.10443.62 millions and Earning per Share (EPS) was 3.96. The Indian Institute of Planning & Management-Ahmedabad
  61. 61. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 47 Chapter 5: DIFFERENT OPERATORS SEGMENT 5.1] Introduction to various segments:- The telecom sector has shown robust growth during the past few years. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation. 1) Fixed Line Overview: A monopoly sector controlled by Government until 1996 Today 6 service providers, 2 State Owned, rest private Subscriber base 40.48 millions (September 2006) Sector growth slowed since mobile tariffs fell Only 1.83 million subscribers were added in one year (May 2003-May 2004) Increased competition from CDMA Services The major players like BSNL, MTNL, and VSNL in the fixed line are coming up with new tariffs and discount schemes to gain the competitive advantage. The Public Players and the Private Players share the fixed line The Indian Institute of Planning & Management-Ahmedabad
  62. 62. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 48 and the mobile segments. Currently the Public Players have more than 60% of the market share. 38% Private Players Public Players 62% (Source: DoT) There were 94.65 millions telephony customers added during the year of 2007-08. Indian telephony has achieved the growth of 43% from 2007 to 2008. Tele-density can be described as telephones per hundred populations. India’s telephony tele-density by March-2008. (Source: TRAI) The Indian Institute of Planning & Management-Ahmedabad
  63. 63. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 49 In India, fixed line service is firstly run by BSNL/MTNL and after there are several other private players too, such as Reliance Infocomm, Tata Teleservices and Airtel fixed line is facing stiff competition from mobile telephones. The competition has forced the fixed line services to become more efficient. The fixed line network quality has improved and connections are now usually available on demand, even in high density urban areas. There were 0.24 millions fixed line subscribers added during March-2008. With this, total 39.42 millions fixed line subscribers were added in March- 2008. 2) Wireless Overview: 29 million GSM, 9 million CDMA subscribers (June 2004) Both GSM 900 & 1800 present CDMA operators use 1800 MHz Band Number portability is missing Government is yet to make decision on 3G spectrum The Indian Institute of Planning & Management-Ahmedabad
  64. 64. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 50 India's telecom sector is carved into 23 circles or zones, classified as "metro" and "A", "B" and "C" circles, based on subscriber potential Unified licensing introduced in 2004 As a part of Unified license policy, 15% of operator revenues go to the government To operate, each circle requires a different license Lowest call tariffs in the world -- as low as one Euro cent a minute on average The Wireless (Mobile and WLL [F]) Market has reached 129.54 million as on 30th September 2006 against 112.14 million subscribers in the previous quarter. During this quarter, 17.4 million subscribers were added, thus recording a growth of 15.52%. By the end of March 2007, total wireless subscribers were increased to 1650.11 lakhs. The Indian Institute of Planning & Management-Ahmedabad
  65. 65. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 51 Total Wireless Subscribers (Source: TRAI Report 2007-08) 3) Broadband Overview: Broadband is mainly used for the purpose of internet connections. BSNL is more popular than any other service providers in this segment. It carries highest market share. Apart from BSNL, Airtel is also providing this service. The growth of broadband in India is comparatively slow. After the announcement of the broadband policy in October 2004 India had just 3.13 millions broadband connections at the end of December 2007. There were 9.63 millions wireline Internet Subscribers at the end of September 2007. The Indian Institute of Planning & Management-Ahmedabad
  66. 66. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 52 (Source: TRAI Report 2007-08) Total Broadband connections in the country have reached 2.47 millions by the end of July 2007. During July 2007 there is addition of 0.05 millions connections. The broadband subscribers’ growth from March 2006 to July 2007 is shown below: (Source: TRAI press release) (In millions) Addition March- June- September- December- March- June- July- during 06 06 06 06 07 07 07 April-07 to July-07 1.35 1.57 1.82 2.10 2.34 2.42 2.47 0.05 The Indian Institute of Planning & Management-Ahmedabad
  67. 67. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 53 Broadband access can be provided using various technologies: • Digital Subscriber Line: Existing PSTN infrastructure having copper loops up to the subscriber provides the most cost effective option for broadband delivery. Digital Subscriber Line (DSL) has become an important technological option for provisioning broadband services through the copper loop of public switched telephone network (PSTN). DSL speeds are influenced by the distance between the subscriber and the local exchange, the gauge of the phone wire, and the type of DSL technology. This technology offers a dedicated amount of bandwidth that does not vary with the number of subscribers logged on, in an area. The fixed wireline subscribers in India have been accounted to a population of around 39 millions (14 millions in rural areas and 25 millions in urban areas) and are mainly owned by BSNL and MTNL. The existing cable networks need to be suitably upgraded and then around 50-60% of the cable network can be used for providing broadband services with varying speeds depending upon the length of the copper cable. The challenge before BSNL/MTNL is to make use of these copper cables quickly for broadband The Indian Institute of Planning & Management-Ahmedabad
  68. 68. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 54 services, to have a commanding position in the market and to achieve this, they will have to device various innovative ways. • Cable TV: New technological developments in cable TV networks have made it possible to send data in both directions via usage of different channels on separate blocks of 6 MHz frequencies, making Internet access over cable TV a viable solution. Presently, there are 71 millions Cable TV subscribers in India, hence one can assume that this last mile infrastructure reaches more people than even the copper loop infrastructure (40 millions) and can be leveraged in providing cable operators with a new business model while giving a stimulus to broadband penetration. However, this cable TV network requires lot of up-gradation, and, in turn, added cost. In the US and Canada, the cable TV network is a dominant form of access for broadband services. • Direct to Home: DTH is another technology that could be used for providing broadband services. At present, it is being used for TV transmission only; however, it can be utilized as the downlink path for providing broadband connections. Uplink (connectivity to the ISP equipment/node) shall have to be through independent connections, The Indian Institute of Planning & Management-Ahmedabad
  69. 69. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 55 may be, through dial up/GPRS/EDGE, but the cost of the uplink is the main issue to determine success and popularity of this option. • Satellite: The provision for broadband using satellite is another option but the cost of such a network is extremely high. Hence, satellite can at best be used in remote and inaccessible hilly areas but it might not be the most appropriate option where other technologies can provide cheaper broadband service. • Fiber Optics: The fiber optics technology can provide unlimited bandwidth and the national long distance network has major deployment of this technology. This technology has also replaced the copper network in the intra-city backbone network. The fiber-based models are capable of providing a huge amount of bandwidth in the last mile, as well as, provide a true IP and converged network that can deliver high quality voice, data, and video. Fiber To The Curb (FTTC) and Fiber To The Home (FTTH) networks make use of fiber cable into the last mile. Such a network is quite suitable for providing high- speed broadband services. Some operators have implemented overlay optical fiber networks in big towns for providing large bandwidths to industrial and big commercial organizations. However, their initial The Indian Institute of Planning & Management-Ahmedabad
  70. 70. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 56 deployment cost is very high, mainly due to the high cost of laying the cable. • Wireless Technology: Wireless network is another option to provide wider broadband access solutions. Initially, wireless networks were considered a solution for providing telecom facilities to harsh landscapes and lightly populated areas where it was difficult to provide conventional wire-line networks, as the cost of wireless networks were comparatively higher. Technological developments in the wireless facility during the last one- decade have completely changed the telecom scenario. Mobile services have taken over the fixed line network on account of reduction in the cost of the equipment, ease of installation, operation and maintenance, flexibility for service providers, and convenience to end users. Wherever the penetration of copper loops is not widely spread, the laying of new copper cables and optical fiber cables is an expensive option due to high cost of right-of-way and high operational cost. Therefore, wireless-based access is an ideal solution for widespread last mile coverage through a combination of different technologies like WiMax, Wi-Fi, etc. These technologies have the added advantage of interoperability and economy of scale due to international standardization. However, for the deployment of any wireless The Indian Institute of Planning & Management-Ahmedabad
  71. 71. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 57 technology, suitable and sufficient spectrum availability and its efficient utilization is a must. • Wireless fidelity (Wi-Fi) is a term used for a certain type of wireless local area networks. Wireless LANs are most commonly used in the last mile to provide coverage for few hundred meters as diffusers of a broadband connection. This can be used in the office environment for providing connectivity to portable devices such as laptops, and commercial hotspot solutions for wireless connectivity for the Internet. For implementing Wi-Fi access networks, a backhaul network is required; this can be copper cable, optical fiber, or WiMax. Wi-Fi can operate in unlicensed 2.4 GHz band and 5 GHz band depending upon its version in the 802.11 family. • WiMax (worldwide interoperability for microwave access) is a high- speed wireless technology that supports fixed, nomadic, portable, and mobile access. It is claimed that WiMax can provide speeds up to 14.4 Mbps and is likely to support much higher speeds with further advancement. Due to the support for higher speeds, wider coverage and ease of installation, WiMax is considered one of the most promising technologies to provide high-speed Internet. The Indian Institute of Planning & Management-Ahmedabad
  72. 72. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 58 5.2] Public vs. Private:- o Private Sector is growing faster than the public sector. In total telephone connections, the share of private sector increased to 72.40% in December 2007 compared to 20.9% in 2003. o The private sector is mainly active in wireless segment than the fixed line segment. Fixed line segment only consists of about 2%. (Source: DoT) Government has issued new guidelines and new single license for internet services in the year 2007 instead of four licenses required earlier. As on December 31, 2007, there were 378 licenses for internet services and 9.69 internet subscribers. The Indian Institute of Planning & Management-Ahmedabad
  73. 73. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 59 5.3] Licensing issues in India:- Different regulatory tariffs and business models are to be relooked. Different service providers are in different licensing regime, having different license fees, performance obligation guarantee, and annual rental and spectrum charges. Mismatch in the rules and regulation governing cable operators, broadcasting agencies and telecom service providers. Difference in areas like quality of service, Tariff and subscribers centric codes. Popularizing of Voice over IP Networks services in managed environment are creating various licensing issues: o Numbering scheme related issues o Interconnection between ISPs and traditional telecom service providers for IP telephony o Security The Indian Institute of Planning & Management-Ahmedabad
  74. 74. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 60 Chapter 6: RURAL MARKET 6.1] Introduction:- Access to telecom services is the key to development and growth and that access in rural market is one of the most challenging aspects of the growth. Information and Communication Technologies (ICTs) provide new and exciting opportunities to those who have access to them. However, existing economic imbalances and social inequalities will be deepened if access is unequally distributed. Unequal access to communications, leading to a huge digital divide between the rich and the poor, the urban and the rural populace only, increases the existing divide. That is why rural market is very much important in today’s scenario. There are many opportunities available for development. Low cost wireless solutions are now available for rural areas at affordable prices. 6.2] Growth of Telecom Services in Rural market:- Inadequate access in rural India- Over 70% of the population lives has caused further marginalization of the marginalized. Therefore, it is vital that an enabling environment through policy and regulatory measures is created The Indian Institute of Planning & Management-Ahmedabad
  75. 75. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 61 for the transformation of the existing digital divide into digital opportunity. (Source: DoT report 2007-08) These graphs clearly show the huge success in our policies towards urban telecommunications and perhaps a failure in replicating the same for rural areas. To drive telecom development, the Indian Government has imposed a Universal Service Obligation (USO) on operators with the threat of penalties if they don't reach their rural targets. The average cost of taking a telephone line to rural areas is almost Rs. 60,000 to 80,000 compared to about Rs. 20,000 to 25,000. Rural Wireline The Indian Institute of Planning & Management-Ahmedabad
  76. 76. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 62 Subscriber base stood at 11.99 millions in quarter ending September 2007 as compared to 12.27 millions in quarter ending June 2007. (Source: TRAI Report 2007-08) BSNL is a clear winner in rural market in case of wireline market. There is no competition in rural market with BSNL. BSNL is leading with almost 100% market share. Following graph shows the true picture of rural telephony market: The Indian Institute of Planning & Management-Ahmedabad
  77. 77. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 63 (Source: TRAI report 2007-08) Rural telephony is mainly based on BSNL. BSNL has provided Village Public Telephones (VPTs) in 5.18 lakhs villages and 241.31 lakhs Direct Exchange Lines (DELs) in rural areas as on December 31, 2007. The Indian Institute of Planning & Management-Ahmedabad
  78. 78. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 64 Chapter 7: Foreign Direct Investments in Indian Telecom 7.1] Introduction:- FDI plays an important role in telecom sector as well as an economy as a whole. Earlier, there were very few public players like BSNL, MTNL and VSNL in this sector but as the time progressed and competition increased, the private players like Airtel, Reliance, Tata, Vodafone and Idea came into play which changed whole scenario of telecom sector. FDIs are important because they not only bring capital and technology into the market but they provide employment opportunities and effective productivity also. The liberalization measures post-1990 have changed with foreign investments radically, now portfolio as well as Foreign Direct Investment are not only allowed but also actively encouraged. During the decade of the nineties, the 'ceilings' on FDI in different sectors were progressively raised. In 2001, 100 per cent foreign investments were allowed in several industrial sectors. Also, 100 per cent Foreign Direct Investment is allowed in almost all the infrastructure sectors. The Indian Institute of Planning & Management-Ahmedabad
  79. 79. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 65 FDI policy provides the investor friendly environment growth to the telecom sector. It is one of the sources pf huge funds to meet fast network expansion. During the year 2007-08, total FDI equity inflow was Rs. 3901 crores in India. FDI in Indian telecom sector has a bright future ahead. It is the third largest recipient of FDI after financial and non-financial services and computer hardware and software, which attract 20.43% and 15.21% respectively. (Source: DoT report 2007-08) The Indian Institute of Planning & Management-Ahmedabad
  80. 80. Critically analyze the customer preference and satisfaction measurement in Indian Telecom Industry 66 7.2] Effects of FDI in Indian Telecom:- • Telecom service at subsidized prices. • FDI inflows will allow multiple benefits such as technology transfer, market access and organizational skills. • In India where 70% of population still resides in rural areas, there is a dire need of infrastructure in telecom, which FDI can provide. • Foreign currency flowing in the country. • Harmonious relationship with country from which foreign investment is being made. • There will be increase in competition with local players, which will benefit consumers. • It will have a multiplier effect. • Telecommunication facility at reasonable price, affordable to many. • More technological inflow, will improve voice & data quality. • Free flow of capital is good for Indian consumers. Foreign direct investment in telecom has been hiked up from 49% to 74%. This move is positive for the sector, as it requires investments of Rs 700